Calculus VCT plc

Why Invest

Positives

Strategy: To invest in a portfolio of unquoted companies to preserve capital value while generating an income stream.

Issues

Exposure level: With the majority of the VCT being funds raised in the last two years, about half of the assets are currently invested.

The Investment Manager

Positives

Team: One of the longest-standing managers in the VCT/EIS area, Calculus has a very experienced and stable team.

Issues

Past performance: Write-offs over the last couple of years have adversely affected Calculus’s previously very good performance. An average realised 13% IRR is still credible.

Nuts & Bolts

Offer: To raise £5m, with £5m over-allotment facility in the 2017/18 and 2018/19 tax years.

Diversification: The existing portfolio has 22 investments with a weight of over 1%.

Valuation: Investors will receive valuations twice a year. Industry guidelines will be used, with two auditors examining the figures.

Specific Issues

Fees: Mixture of direct fees and charged via the investee companies.

Performance fee: 20% on investor share of proceeds over 105p for every 100p invested.

Risks

Risk mitigation: The aim is to diversify by sector, and the focus on relatively more established companies should also help mitigate some of the risk.

Target return: Overall, the strategy is medium-risk relative to other EIS/VCT products, with the target company IRR of 20% and capital return of 2.5x towards the top end of what we’d expect for that risk category. The VCT targets an annual dividend of 4.5% of NAV while also providing capital growth.